FICO Study Reveals Impact of BNPL Loans On Consumer Credit Scores
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FICO, a company known for using data to help businesses, shared important information from a study about the effects of adding “Buy Now, Pay Later” (BNPL) loans to a person’s FICO® Score. The study showed that adding BNPL data could help some people’s credit scores go up and help lenders manage risk better.
FICO worked with Affirm, a payment network that helps consumers and businesses. Together, they studied the FICO® Scores of over 500,000 people who had taken out an Affirm BNPL loan.
FICO And Affirm Analyze The Impact Of BNPL Loans On Credit Scores
Both companies compared these scores with a group of people who did not use Affirm’s BNPL service. FICO also looked at how adding Affirm BNPL loans to credit reports could change the credit scores of those using the service. The study wanted to learn how BNPL loans could change FICO® Scores. It also helped decide how to share BNPL data with credit bureaus and how to treat it when counting FICO Scores.
FICO made a special way to add BNPL data into the score process. This way showed that adding BNPL data could help some people get higher scores.
Ethan Dornhelm, a FICO boss, said it is important to know how BNPL data can change scores, especially with more people using BNPL loans.
He said adding BNPL data can make some scores higher and help lenders understand risk. FICO thanked Affirm for helping with the study.
FICO Develops New Method To Improve Credit Scores With BNPL Data
One special feature of BNPL loans is that people might open many of these loans in a short time. To solve this, FICO created a new method of combining multiple BNPL loans when calculating credit scores. This approach worked well and helped boost scores for some BNPL users.
Don Lemire, vice president of Credit Analytics at Affirm, thanked FICO for working together on the study. He said that their goal was to improve how BNPL data is reported to credit bureaus and to help the industry follow best practices.
Lemire also invited other BNPL providers to join them in studying how BNPL data can help consumers and the financial system.
FICO wants to share a new idea from the study. This idea will help lenders use BNPL data when deciding how to check credit. Julie May, a FICO boss, said FICO always looks for new ways to help lenders use credit data fairly.
FICO is famous for helping businesses and people. They work in many jobs like health, shopping, and money. FICO’s credit score is used by most big U.S. lenders.
